Inventories Limit Freight Shipping, Expenditures
North American shipping activity declined 4.6% year-over-year in August, according to the Cass Freight Index, a measure of shipping activity in trucking and other modes of transportation, but it was not unexpected as manufacturing numbers also fell off.
“The decline in shipments did not follow the typical upward movement in August, but given the weak level of new manufacturing orders placed in June and July, it is not unanticipated,” the St. Louis-based firm said.
Also, the report noted transportation spending year-over-year fell in August by 8% as abundant capacity kept spot prices low.
In addition, the report said in what was a “diversion from the normal pattern,” the number of freight shipments fell 1.2% in August from the month earlier on the heels of the 1.2% decline in July.
In August, retailers generally are resupplying for fall sales, but the report said high inventories and a rising inventory-to-sales ratio slowed ordering earlier this year.
In fact, it added, inventory levels — for retail, wholesale and manufacturing — are well above the high point prior to the inventory drawdown at the beginning of the Great Recession.
A number of factors that impact inventory carrying costs have been driving the climb in inventories, including: the lowest interest rates “in recent history,” abundant warehouse space, low lease rates, and flat taxes and insurance costs, it said.
Meanwhile, freight expenditures dropped 2% from the previous month as the number of shipments tailed off, the report said. Spot market prices were lower in August, contributing to the decline.
“The expected pickup in freight shipments in September should drive overall freight expenditures back up. Rates will remain flat for the most part, as trucking companies forgo rate increases to keep their best customers,” it said.
Railroad traffic rose modestly, with carload traffic up 2.7% and intermodal up 3.5%. The latest data available from American Trucking Associations for truck tonnage showed a drop of 0.8% in July.
